Recovery Well Under Way

April 19, 2016

We closed our final commentary of 2015 by saying, “The first part of the recovery is almost always the steepest and quality companies that pay sustainable dividends do not remain out of favour for long.” It is nice to see the recovery well underway after the first quarter of 2016. The S&P/TSX Composite Total Return Index gained 4.5% after a wild ride that saw the Index down more than 10% in the first two weeks of the year, only to recover strongly in the last 6 weeks of the quarter. The S&P 500 Total Return Index followed a similar pattern, closing up 1.4% in local currency, however the Canadian dollar also rebounded 6.4%, hurting US-denominated returns in Canadian accounts for the first time in recent memory.


The Banking, Pipeline, Telecommunication and Utility sectors all outperformed the benchmark during the quarter, leading to strong outperformance in the Leon Frazer equity portfolios. Valeant Pharmaceuticals endured an epic final collapse, falling nearly 90% from its mid-2015 peak with no tangible explanation of either what caused the collapse or what the likely catalyst is for a recovery. Pure Energy and Metals producers were the best performing sectors, while Health Care and Technology lagged, reversing the powerful flow of funds from the past 18 months. The NASDAQ remains the best performing major North American index on a 3-year basis, but it was the only one to post a negative Q1 2016 return in local currency terms, down 2.7% (-8.6% in Canadian dollars).

Read full Q1-2016 Quarterly Review

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